Despite the temporary pause in terms of new developments for the US budget talks, investors continue to expect a deal can be reached in time, supporting stocks gains. Positive European data also helped.
Euro fails to hold above 1.3300
So, investors seem to have forgotten all about the eurozone debt crisis and shifted their attention to the US budget negotiations, which have been driving price action lately.
The EUR/USD has risen 7 out of the last 8 trading days, and printed an 8-month high of 1.3307 at the beginning of the New York session. Even though the pair holds the positive tone, with immediate target at 1.3385, EUR/USD is correcting some of its recent gains on short-term overbought readings. The pair was last up 0.2% at the 1.3255 area. On the downside, loss of the 1.3220 zone could jeopardize the bullish bias, and could see the pair slip towards the 1.3185 zone.
According to the TD Securities team, market worries about the 'fiscal cliff' may not pick up until the end of the week. "Provided we don't get a fiscal cliff shock, a persistent grind higher looks to be the most likely scenario, which could see EUR/USD in the upper 1.35 area in the next few weeks", they commented.
Meanwhile, the UBS analyst team holds a bullish bias for the cross and argues that the break of 1.3384 opens 1.3386 and then 1.3493. Support lies at 1.3144 ahead of 1.3067.